The chapter discusses the formation of dwarf galaxies, particularly focusing on their diffuse nature and low metallicity, which are driven by supernova-driven winds. The observed trends in surface brightness and metallicity with decreasing luminosity are better explained if the gaseous protogalaxies form within dominant halos, consistent with the presence of "cold" dark matter. The theory predicts that faint dwarfs have increasing mass-to-light ratios and slow decreases in velocity dispersion. The condition for global gas loss due to the first burst of star formation is that the virial velocity must be below a critical value of about 100 km/s. This leads to two distinct classes of galaxies: diffuse dwarfs (dEs and dIIs) that retain some gas and originate from typical density perturbations, and brighter, normal galaxies (including compact dwarfs) that form only from the highest density peaks. This statistical bias favors the formation of bright galaxies in denser regions, enhancing their clustering relative to diffuse dwarfs. The diffuse dwarfs are expected to trace the mass distribution, including in voids where bright galaxies are scarce. The critical curves for cooling and gas loss align well with the observed properties of dwarfs and normal galaxies, derived from CDM perturbations.The chapter discusses the formation of dwarf galaxies, particularly focusing on their diffuse nature and low metallicity, which are driven by supernova-driven winds. The observed trends in surface brightness and metallicity with decreasing luminosity are better explained if the gaseous protogalaxies form within dominant halos, consistent with the presence of "cold" dark matter. The theory predicts that faint dwarfs have increasing mass-to-light ratios and slow decreases in velocity dispersion. The condition for global gas loss due to the first burst of star formation is that the virial velocity must be below a critical value of about 100 km/s. This leads to two distinct classes of galaxies: diffuse dwarfs (dEs and dIIs) that retain some gas and originate from typical density perturbations, and brighter, normal galaxies (including compact dwarfs) that form only from the highest density peaks. This statistical bias favors the formation of bright galaxies in denser regions, enhancing their clustering relative to diffuse dwarfs. The diffuse dwarfs are expected to trace the mass distribution, including in voids where bright galaxies are scarce. The critical curves for cooling and gas loss align well with the observed properties of dwarfs and normal galaxies, derived from CDM perturbations.